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Please number answers !!!! QUESTION 12 20 points Save Answ The Auto Alen Company is considering adding a robotic machine to its production line. Its
Please number answers !!!!
QUESTION 12 20 points Save Answ The Auto Alen Company is considering adding a robotic machine to its production line. Its base price is $1.500.000 and it would cost another $30.000 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $750,000. The MACRS rates for the first 3 years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $20,000. The machine would not change revenues, but it is expected to save the firm $600.000 per year in before-tax operating costs, mainly labor. The company's marginal tax rate is 40%. a. What is the Year-O cash flow? (5 points) b. What are the net operating cash flows in Year 1. 2. and 3? (5 points) c. What is the additional Year-3 cash flow (i.e., the after-tax salvage and the return of working capital)? (5 points) d. If the project's cost of capital is 10%, should the machine be purchased (Using NPV, IRR, MIRR, and PI to analyze the project)? (5 points)Step by Step Solution
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